Narayan AmmachchiNearshore recruitment agency CodersLink has filed for bankruptcy, blaming the so-called “super peso” for its financial woes.
San Antonio-based CodersLink filed the voluntary petition under chapter 11 of the US Bankruptcy Code on March 12, 2024. According to the filing, the company’s debt arises to US$720,000, with assets amounting only to US$516,000.
The creditor owed the most amount of debt (US$570,000) is SaaS financing firm Capchase. The list of creditors also includes US bank Capital One, funding firm Hum Capital and financial titan JP Morgan Chase.
CodersLink CEO Jesús Salas put the brunt of the company’s financial situation in the strengthening of the Mexican peso over the past year.
“We decided to file for chapter 11 to restructure the debt we received last year that we got to reduce the impact that we had from the fluctuation between the US dollar and Mexican peso, which increased our costs [talent salaries] and reduced our profit by 15% margin,” Salas told the San Antonio Express News in a statement.
Mr. Salas also mentioned the “consistent growth and promising projections” of his company to underscore the impact of currency fluctuations. According to the bankruptcy filings, CodersLink’s revenues increased from US$5.4 million in 2022 to US$6.9 million in 2023.
Bankruptcy filings under chapter 11 allow businesses the time and flexibility to negotiate debt with their creditors. In other words, CodersLink isn’t dead as a business. It just needs time to sort out its finances.
CodersLink is connected with more than 100 US firms and reportedly built a tech community of over 20,000 developers across Latin America, according to data from Crunchbase.
A dangerously strong peso
The Mexican peso has had a couple of banger years in the currency markets, and seems to be heading for a strong performance in 2024.
Mexico’s currency opened 2022 with a value of 20.40 units per USD. By the end of 2023, it had fallen below the 17.00 units per USD mark. As of April 10, 2024, it was valued somewhere around 16.40 units per USD.
The peso’s performance has been widely celebrated by Mexico’s current federal administration. Nevertheless, exporters of both goods and services felt the hit deeply in their pockets.
A stronger peso means that companies and professionals who get paid in US dollars are seeing their earnings dwindle when transformed to local currency. Some of them might feel pressured to increase their rates to keep up with rising costs and a cloudy macro landscape.
“In the mid-term, export prices will adjust, for sure, which might cause Mexico to lose some of its competitive edge,” Gabriela Siller, Director of Economic and Financial Analysis at Banco BASE, stated in a previous interview with NSAM.
The scenario contrasts with the wider reality of nearshore IT. Demand for software devs and engineers keeps growing, and Latin America is among the regions that have been banking on that trend. Even under a relatively darkened outlook over the past couple years, providers of nearshore staffing services performed well, and decision makers in business seem to be getting their optimism back.
That sentiment is shared by CodersLink’s CEO, who expects AI to accelerate the need for digital services and a doubling of demand in the following decade.
“Latin America is an excellent region to be in,” he told the San Antonio press.
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